Before the bell: news from London lifts Wall Street

Chinese markets rally again, Inditex and Oracle to report earnings, and US inflation data is due later today.

Wall Street rose by 0.6% yesterday. Roughly 5,600 kilometres away, delegations from the United States and China reached an agreement in London on a framework to ease trade restrictions. Details remain scarce, but investors are optimistic that a deal will eventually be finalised. Nike (+3.2%) and Walt Disney (+2.7%) outperformed, while Salesforce (-1.5%) and McDonald’s (-1.4%) lagged behind. In Europe, sentiment was more subdued. The Euro Stoxx 50 lost 0.1%, and the Frankfurt index dropped by 0.8%. Rheinmetall shares tumbled by 103 euro, or -5.8%. In Paris, banking stocks slid: BNP Paribas (-3.1%), Crédit Agricole (-2.9%), and Société Générale (-2.8%). In contrast, the Bel20 edged up 0.3%, thanks to Umicore (+17.2%) which received a buy rating from Goldman Sachs, and UCB (+2.7%). Ageas (-2.7%) gave back a large portion of Tuesday’s gains.

In Tokyo, the Topix was unchanged this morning, while the Nikkei added 0.5%. Tokyo Electron (+3.9%) and Konica Minolta (+3%) stood out positively, whereas Nintendo dropped 3.7%. Hong Kong posted a 1% gain. Alongside BYD (+3.2%), insurance companies Ping An (+2.4%) and China Life Insurance (+4.2%) also performed well. Since Ageas is active in China, it’s likely that stock will also see buying interest this morning. At 14:30 CET, the US inflation data for May will be released. Expectations point to 2.5%, up from 2.3% in April. Oracle will report quarterly results later today, as will Inditex, the company behind Zara, Pull&Bear, and Massimo Dutti.

In praise of folly

GameStop published its quarterly earnings yesterday. Revenue fell by 17% — no surprise, considering that few people still buy physical games in brick-and-mortar stores. GameStop should have disappeared long ago, but a 2021 meme-stock frenzy sent its share price soaring as thousands of retail investors squeezed out short sellers. Management capitalised on the hype by raising capital, selling new shares at inflated prices. GameStop then claimed it would challenge Amazon, but that fantasy was short-lived. Management soon pivoted to mimic MicroStrategy, converting the company into a bitcoin-holding vehicle.

More than 500 years after Erasmus wrote In Praise of Folly, not much has changed. While some may view irrational exuberance as a source of joy, we urge caution — don’t fall for it.

Activist joins Novo Nordisk

Novo Nordisk’s share price is 45% lower than a year ago. When is a bargain low enough to grab? Apparently, now, as Parvus Asset Management enters the scene. The activist hedge fund from London has quietly built a position in the Danish pharmaceutical group. The exact size is unknown — it has not yet crossed the 5% disclosure threshold — but the market welcomed the news, sending the stock 6% higher yesterday.

Parvus has a history of shareholder activism, including a campaign at Ryanair. Their goal is always the same: influence corporate strategy to unlock shareholder value. Novo Nordisk is currently seeking a new CEO. Whoever steps up might want to pay a visit to Parvus to align on future direction.

Did you know…

Swedish truckmaker Scania, a subsidiary of the Volkswagen Group, is planning to acquire the lab facilities of the bankrupt Northvolt? The goal is to prevent critical battery technology from falling into Asian hands.